Back to the Basics: An Overview of Board Member Responsibilities

by Angelique Ofrasio on July 08, 2019 and last update on July 08, 2019

At first glance, it would seem that the boards and their board member responsibilities are irrelevant or only have a small impact to the operations of the company. But in reality, a board’s performance can make or break an organization. A recent study by McKinsey reports that boards who can execute core operations and maintain good board relations, deliver stronger financial returns for the company. The extent of the effect of board members, also involves some of the common problems that companies have been facing for years. For instance, tension between the CEO and the management, or between the CEO and the board itself, can be due to the fact that the board was not that thorough in the recruitment and evaluation of the candidates for the CEO.

Seeing as how much a board affects the entirety of a company’s strategy, direction, and operations, shows that improving the way boards work can ultimately provide value for the company. Evaluate your board’s performance by checking how well they execute these six basic board member responsibilities.

1. Establishing the Organization’s Purpose and Direction
Essentially, it is the role of the board to set the overall direction of the company. This entails assessing the current strategy of the business and making sure that these are aligned with the organization’s goals.

Board members cannot lead and cannot make decisions for its organization effectively if they know nothing about it. An important element of their board member responsibilities is to strive to be more familiar with the purpose of the organization’s work and the scope of its day to day concerns. One way to start would be for the boards to take time to discuss the organization’s vision, mission, strategies, and policies. Understanding what kind of challenges, opportunities, and threats that the industry is facing, and having expectation setting with the company’s stakeholders, management, and employees, would be some of the things that boards can consider in order to have a better grasp of the context of the company they are serving.

2. Recruiting, Evaluating, and Monitoring the CEO’s Performance
Recruiting, supervising, retaining, and evaluating the CEO or executive director is probably the most crucial responsibility of the board. Think of it as the board being the script writer of a play, needing a CEO who can serve as the director to execute their vision: Imagine the kind of tension that could arise when you have a director who does not understand the intended purpose and effect of the play that the script writers have so passionately and purposefully written?

Most conflicts experienced by a company is due to the CEO not being aligned with the board, the management, and the rest of the employees. It is reported that a significant number of CEO turnovers are due to the candidate not fitting in the company culture further proving that board members should take their responsibility of recruiting and screening a new CEO seriously.

Boards can prepare for this task by figuring out what they first need and expect from the new CEO given the company’s current situation. Then they can start by listing down specific skills or characteristics that they think would be necessary for the CEO to effectively execute the company’s plans and strategies. Some other important considerations might include the candidate’s leadership style, ability to represent the company to stakeholders, and adaptability to the company culture.

3. Safeguarding the Company’s Assets and Resources
Aside from being an overall guide and a recruiter, board members are also assigned to be trackers. Part of their board member responsibilities is to protect and keep track of the company’s assets and resources. Investors and other stakeholders invest money into a company, with the assumption that their investment will bring huge returns. It is then the duty of the board to make sure that all resources are used wisely and to assure transparency and accountability with the company’s stakeholders.

Board members have a tendency to focus purely on strategy and operations — fully forgetting to evaluate if the expenses for these plans are still reasonable and in-line with the company’s purpose and direction. To avoid this, boards must take a more proactive stance with their fiduciary duties by being more involved in the monitoring and assessment of the organization’s resources. Boards should no longer just depend on the CFO or treasurer in managing the company’s assets and resources.

Although, the board’s responsibility is not only limited to financial assets and resources It also covers safeguarding confidential data, physical infrastructures, and valuable connections/relations. It would greatly help if boards make an effort to constantly update themselves on the new technology available, that could help protect the company’s assets and make other important resources like data and infrastructure, more secure.

4. Setting Policies and Providing Oversight
Some common problems confronted by organizations are rooted in the fact that there are no clearly established policies to begin with. An example would be employees becoming unproductive and complacent because they feel that there are no serious repercussions for their actions. Part of overseeing an organization involves the board member responsibility to reassess, revise, and establish necessary and relevant policies that would better guide its employees to perform better.

After the board has established the purpose and direction of the organization, setting the company policies should come directly after. This is because it is vital in defining the focus of the company and in differentiating the responsibilities among the board members, the management, and the employees. Policies should cover concerns related, but not limited, to personnel compensation, financial approval protocols, crisis management response plan, whistle blower situations, conflict of interests, and confidentiality provisions. Having standard policies in place can surely address the conflict, confusion, and tension that may usually arise from the lack of information and clarity.

5. Assessing the Board’s Internal Performance and Controls
How well boards perform and conduct their processes highly determines a company’s health and survival. Board members should remember their responsibility to abide by the measures and guidelines set in place to make sure that board members will be able to successfully deliver and fulfill their role in the company.

Constant assessment of the board’s own performance also promotes transparency and accountability within the company. By doing so, boards also set the right standards for the management and the employees to follow, making everyone in the company aligned in effectively working towards the company’s goals and purpose.

6. Investing in Personal Development
Boards face a lot of industry trend shifts, regulatory concerns, and economic fluctuations. Working in a fast-paced, constantly changing world, it is extremely important for boards to be highly adaptable and to be open in gaining new knowledge and skills that will help with all the decision-making they have to do for the company.

It is each board member’s responsibility to provide the best possible solution for every situation. It is imperative that they still strive to improve upon their already stellar track record and capabilities, by working on aligning their skills and expertise in order to effectively execute the company’s strategies, and by venturing out and gaining more exposure on the aspects that they think they still lack.

Even when it isn’t very evident, how well boards deliver their board member responsibilities have a great effect on the organization as a whole. Boards have a legal and moral responsibility to steer their organizations towards the direction that serves the best interest of its stakeholders. With that, it is extremely vital that boards constantly reassess and reevaluate their performance by referring back to these basic board member responsibilities.

By working on and improving the way your board works, you will be able to create value and ensure sustainability for your organization. an undeniably huge impact in a company and its overall operations.